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How to measure the ROI in social media
April, 2010

Measuring the ROI of a social media project is like the Holy Grail of online marketing; everybody is searching for it but only few have seen the light of wisdom. In principle it should not be difficult at all to measure your ROI. You just have to do what you have always done: plan your project well with clear defined goals and KPI’s and then measure those KPI’s. So, what is so difficult about it?

Social media is different
Well, your first problem is that you are trying to compare apples with pears. Return on investment is a financial measurement, while social media programs are emotional. Therefore it is not possible to determine the ROI of your project directly.

Your second problem is that in general marketing campaigns are limited to a certain period, which enables you to measure the ROI over that period. Social media projects however tend to be ongoing. You cannot just tell your customers you are going back to your former ivory tower behaviour after you “finished” your project. You can of course look at your sales and see what happened during the period you first started with social media, but there are so many more factors involved that this can only give you an indication.

And your third problem is that you are still thinking as a marketer; as a brand manager. Social media is the total online presence of your customers, talking about you and expecting total transparency and an excellent customer service from you. (Do not think you cannot afford to be totally transparent, because if you will not be transparent, then your customers will make sure they create it themselves!) This means, you should not aim for a financial ROI, but for a social success through an excellent customer service.

Hence you will have to accept that with your social media campaign you need to focus on measuring the social impact; the relationship you build with your customer and accept that this will directly influence your sales.

How to measure your social impact?
There are two sorts of KPI’s you can measure online with your social media campaign: volume and engagement. Volume consists of number of fans or followers, tweets per minute, trending topics, etc. Engagement consists of overall sentiment and comments: the time people spent with your brand, number of Retweets, number of subscribers to your eMails, persistence of your message, customer loyalty, etc.

Measuring the volume can be done with normal analytics programs or is directly mentioned on your social media websites. For example Facebook tells you how many “fans” you have. Measuring engagement is a lot more difficult and you will need a special program to do this. In general you will not have sufficient human resources to measure engagement yourself, so you will need to contract a third party who will use a program like Radian6 or Nielsen Buzzmetrics to measure your social media impact for you.

Let’s try to determine the ROI anyway
Say you are not completely convinced by what I told you above and you want to try to measure your financial ROI anyway. The first step you need to take is to determine your social media strategy: What are you doing there? What do you hope to accomplish? In short: What are your KPI’s? Make sure you choose benchmarks that you can measure over time, or if possible create actions that show you if people bought your product or not.
You will probably have to accept that the KPI’s you can measure will be mainly KPI’s of “engagement”, but that does not mean you cannot measure your influence on sales. As social media campaigns function over longer periods, it will be easier to use correlation. You could measure the emotional impact of your program and correlate this impact with your sales increase over the same period and thus have a good idea of your social media ROI.

Do you have experience with measuring the ROI of your social media projects? Then lets discuss a bit further!
Social media





Some of my personal remarks and opinion on books related to social media marketing:

"Socialnomics" How Social Media Transforms the Way We Live and Do Business, by Erik Qualman


"New rules of PR & Marketing" How to Use Social Media, Blogs, News Releases, Online Video, and Viral Marketing to Reach Buyers Directly,
by David Meerman Scott

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